Euro Weakens as Drop in Consumer Confidence Drives Investors to Dollar

After piercing a minor .618 retracementlevel this morning, selling pressure hit the Euro after U.S. ConsumerConfidence fell more than analysts had estimated. The report pressured equitiesand drove down demand for higher risk assets.

After piercing a minor .618 retracementlevel this morning, selling pressure hit the Euro after U.S. ConsumerConfidence fell more than analysts had estimated. The report pressured equitiesand drove down demand for higher risk assets.

Today’s action is significant because itshows that investors have set aside worries about the European bank stresstests and are now turning their focus toward economic reports. Traders seemedreluctant to go long this morning after the U.S. reported a slight gain in homeprices and amid improved corporate earnings. This represented a shift insentiment as earlier in the month investors chased the Euro on both good andbad news for the Dollar.

The housing report in particular wasinteresting because it gave hope that the housing market may be improvingalthough at a slow pace. Although reports have been confusing to investorslately, today’s break looks as if buyers just gave up on the long side of the Euroor they are making up excuses to take profits. Today’s break also demonstratesthe strong correlation between the Euro and U.S. equity markets at this time.

Technically the Euro is in a position toform a daily closing price reversal top. This could lead to the start of a 2 to3 week break if confirmed.

The break in the U.S. equity markets is also leadingto profit-taking in the higher risk currencies. All three major asset-linkedcurrencies – Australian Dollar, New Zealand Dollar and Canadian Dollar – are inpositions to post closing price reversal tops. If sentiment is turning bearishon risk then look for the start of a correction in these three markets.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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